London wheat hits ?200 a tonne despite export drop

London wheat prices returned to 200 a tonne, viewing data showing the slowest month for shipments in nearly six years as reflecting strong domestic demand, which will curtail exports ahead too.

London wheat for November rose to 201.00 a tonne on Friday, a contract high, and crossing the psychologically important $200-a-tonne mark reached on only three days by a front-month contract over the last year.

The contract closed at 200.25 a tonne, a gain of 0.8%.

The rise came despite data showing UK wheat exports falling to 55,093 tonnes in June, the weakest monthly performance since July 2006, as shipments outside the European Union slumped to 12 tonnes, to Saudi Arabia

Within the EU, exports fell to historically low levels with those to Spain, typically the UK's biggest export market, coming in at zero for the first time since July 1994.

'Domestic needs'

However, the data were seen as an indication of strong domestic demand, as the prospect of a delayed and disappointing harvest prompted UK consumers to buy extra 2011 crop to extend their coverage.

Farmers had harvested 5% of winter wheat, as of Tuesday, compared with the 24% typically combined by then, according to consultancy Acas.

"This is about domestic needs rather than weak export demand," a UK grain trader told Agrimoney.com.

"The data are not going to worry the market, especially with Ensus back onstream."

Ensus, the European Union's biggest, with capacity to swallow some 100,000 tonnes of feed wheat per month, revealed this week it is to reopen this month after a 15-month shutdown blamed on cheap US exports now hampered by changes to both European and US biofuel regimes.

Exports to drop?

Furthermore, the nearby Vivergo plant, backed by Associated British Foods, BP and DuPont, and which is of a similar size to Ensus, is set to begin operations in the last quarter of 2012.

Both sites are aimed primarily at taking feed wheat from the north of England although, being situated near ports, they have the option of utilising imported grain.

Indeed, given the jump in domestic use, the UK's wheat exports look set to fall further in the 2012-13 marketing year, which started in July, after dropping 10.1% last season to 2.39m tonnes, a four-year low.

'A mess'

The UK harvest is expected by the US Department of Agriculture, whose data set global benchmarks, to rise by some 200,000 tonnes to 15.5m tonnes this year, with a rise in sowings more than offsetting yield losses to some of the wettest weather on record.

However, the extent of the downpours is prompting some analysts to foresee a lower figure, although the wide range of results from early harvest with yields from 5.0 tonnes per hectare to 10.8 ?tonnes per hectare according to Acas is making assessment difficult for analysts and traders.

At merchant Gleadell, trading manager Jonathan Lane said: "The UK market remains a mess - low bushel weights, spot demand, lower yields and a delayed harvest make any assessment almost impossible to make.

"There is a long way to go but, at this stage, it is safe to say that we are looking at a new situation - one that not many in the trade have seen, to this extent, before."

Source: http://www.agrimoney.com/news/london-wheat-hits-%A3200-a-tonne-despite-export-drop--4885.html

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